The Management Consultancy Industry


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This slideshow provides an overview of the management consultancy industry, focusing particularly on the major global firms. Issues in client-consultant relationships are highlighted, and lessons for managers seeking to engage consultants are presented.

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The Management Consultancy Industry

  1. 1. The Management Consultancy Industry:Issues in Consultant-Client RelationshipsJames HuntTrimester 1, 2012GSBS6120: Managing Organisational Change
  2. 2. A Review of Our Last LectureOrganisational DevelopmentIntervention Processes1. Three criteria of an effective OD intervention:1. Diagnosis – obtain valid and useful information2. Provide client organisation with alternatives for action3. Build internal commitment2. Importance of determining the client’s readiness for change3. Choosing the depth of intervention: system-wide intra-personal4. The OD Cube:1. Focus of attention: whole organisation or sub-system2. Diagnosed problems3. Modes of intervention
  3. 3. Primary Distinguishing Characteristics of OD1. OD focuses on organisational culture and processes2. OD encourages collaboration between organisational members ofdifferent levels.3. Teams are considered to be vital to an organisation.4. OD focuses on the human, social, technological and structural aspectsof organisations.5. Participation and involvement in problem-solving efforts.6. OD focuses on total system change.7. OD practitioners are facilitators, practitioners and co-learners.
  4. 4. W. Warner Burke
  5. 5. Data gathering is an important element inOD Interventions.
  6. 6. WHAT IS ORGANSATIONAL DEVELOPMENT?Organizational development is an ongoing, systematic process to implementeffective change in an organization.Organizational development is known as both a field of applied behavioralscience focused on understanding and managing organizational change andas a field of scientific study and inquiry.It is interdisciplinary in nature and draws on sociology, psychology, andtheories of motivation, learning, and personality.
  7. 7. HISTORY OF ORGANISATIONAL DEVELOPMENTIn the late 1960s organisational development was implemented in organizations viaconsultants, but was relatively unknown as a theory of practice and had no commondefinition among its practitioners.Kurt Lewin (1898–1947) is widely recognised as the founding father of OD, although he diedbefore the concept became current in the mid-1950s.From Lewin came the ideas of group dynamics and action research which underpin the basicOD process as well as providing its collaborative consultant/client ethos.Lewin founded the "Research Center for Group Dynamics" at MIT (Massachusetts Institute ofTechnology), which moved to Michigan after his death.Lewin’s colleagues were among those who founded the National Training Laboratories(NTL), from which the T-group and group-based OD emerged.In the UK, the Tavistock Institute of Human Relations was important in developing systemstheories.The joint TIHR journal Human Relations was an early journal in the field.The Journal of Applied Behavioral Sciences is now the leading journal in the field
  8. 8. HISTORY OF ORGANISATIONAL DEVELOPMENTRichard Beckhard (1969), an authority on organisational development and changemanagement, defined organisational development as:“An effort, planned, organisation-wide, and managed from the top, to increaseorganization effectiveness and health through planned interventions in theorganisations processes, using behavioral-science knowledge" (Beckhard 1969).Throughout the 1970s and 1980s organisational development became a moreestablished field with courses and programs being offered in business, education,and administration curricula.
  9. 9. HISTORY OF ORGANISATIONAL DEVELOPMENTBetween 1990 and 2010 organisational development has continued to grow andevolve and its influences can be seen in theories and strategies such as:Total quality management (TQM)Team buildingJob enrichmentRe-engineeringKnowledge managementThe intellectual capital movementSemi-autonomous working teamsEmpowered work groupsParticipative employee practices generally such as those at Walmart and Semco.
  10. 10. THE FUTURE OF ORGANIZATIONAL DEVELOPMENTThere are contradictory opinions about the status and future prospects oforganizational development.• Is it a theory whose time has come and gone?• Does its basis in behavioral science, a "soft" science, make it unappealing?• What are the challenges for the future?Bunker, Alban, and Lewicki (2004) propose six areas that could revitalize the fieldof organizational development in the future: virtual teams, conflict resolution, workgroup effectiveness, social network analysis, trust, and intractable conflict.These authors suggest that focusing on these areas will help bridge the gapbetween research theory (i.e., academics) and practice (i.e., consultants).Getting these two groups to communicate with each other will benefit both groupsand promote organizational development efforts.Reference: Bunker, B.B., B.T. Alban, and R.J. Lewicki (2004) "Ideas in Currency and OD Practice:Has the Well Gone Dry?" Journal of Applied Behavioral Science 40, no. 4 (December): 403–22.
  11. 11. THE FUTURE OF ORGANISATIONAL DEVELOPMENTIn a survey conducted by Church, Waclawski, and Berr (2002), twentyindividuals involved in the study and practice of organisationaldevelopment were questioned about their perspectives and predictions onthe future of the field. The most in-demand services at the beginning of thenew century, according to those polled, were:• executive coaching and development• team building and team effectiveness• facilitating strategic organizational change• systemic integration• diversity and multiculturalism.Reference: Church, A. H., Waclawski, J., & Berr, S. A. (2002). Voices from the field: Futuredirections for organization development. In J. Waclawski & A. H. Church (Eds.), Organizationdevelopment: A data-driven approach to organizational change (pp. 320–336). San Francisco:Jossey-Bass.
  12. 12. THE FUTURE OF ORGANIZATIONAL DEVELOPMENTThey list the daily challenges in the field as the need for speed, resistance tochange, interpersonal skills and awareness, and differentiating organizationaldevelopment, which refers to the variety of definitions of organizationaldevelopment among practitioners and how this impacts consultants, clients, andthe clients needs.The opinions on the future direction of the field vary among its practitioners.Nevertheless, the continuing interest in and value of optimizing an organizationsneeds and goals with the needs, wants, and personal satisfaction of its employeesindicate that organizational development will continue to be relevant to and vital fororganizational reform in the future, either in its present form or through evolutioninto other theories and practices.Reference: Beckhard, Richard. Organization Development: Strategies and Models. Reading, MA:Addison-Wesley, 1969.
  13. 13. The Growth of the Modern Management Consultancy IndustryandIssues in Consultant-Client Relationships
  14. 14. The Modern Management Consultancy IndustryConsulting firms usually fall under three broad categories:1. Strategy consultants work with senior management to assess such big-pictureissues as whether to merge with another company or enter new markets.2. Operations consultants examine the internal workings of an organization andways a client can reach operational goals by cutting costs, restructuringdepartments or allocating resources differently, raising product quality orother methods.3. Information-technology consultants help clients use or adopt newtechnologies. Information technology and operations consultants oftenremain on site to ensure their recommendations and changes are enacted,which produces a steady income stream for their firms.
  15. 15. Major Management Consultancy Firms1. McKinsey & Co2. Bain & Co.3. The Boston Consulting Group4. Monitor Co.5. Arthur D. Little6. Booz Allen and Hamilton7. Mercer Management Consulting8. AT Kearney9. Mitchell Madison Group1. Accenture (formerly AndersenConsulting)2. LEK Consulting3. Saville & Holdsworth4. Deloitte Touche Tohmatsu5. Ernst & Young
  16. 16. McKinsey and Co.McKinsey is the most powerful consulting firm in the world. In boardroomsand corporate offices around the world, it is known simply as “TheFirm,” and is often the first recourse for advice when business woesstrike.Such a reputation makes McKinsey consultants highly sought after andexpensive to hire; its 4,500 consultants, citizens of 81 countries,generate an estimated $450,000 per person annually.Customers include some of the bluest-chip companies in the world, suchas PepsiCo, AT&T, GE, IBM and General Motors Corps.Since many ex-McKinsey consultants serve on company boards (up to athird of all boards in the USA, according to some estimates), the firmhas long-term ties and relationships with CEOs at many majororganizations.
  17. 17. McKinsey and Co.Specialties: McKinsey is known as a strategy firm; its consultants are usually areengaged to help create long-term strategic plans for a company, product oroperation. In most cases, consultants work with senior-level executives at clientcompanies.Good: McKinsey tops most consulting firms for prestige and name-recognition; thefirm is in a class of its own. The firm is consistently tapped for world-wideassignments, which means peerless opportunities for diverse experience andtravel (65% of the firm’s revenues are generated overseas). Because of greatconnections, ex-consultants have excellent career prospects.Bad: Allegations of sexual discrimination have created unwanted publicity. FormerMcKinsey associate Suzanne Porter claimed the firm discriminated against herby not promoting her to partner despite outstanding reviews. McKinsey hassince settled the suit.
  18. 18. McKinsey and Co.McKinsey & Co. is one of the oldest of the majormanagement consultancy firms.McKinsey consultants have strong reputations asintelligent and highly effective executives.McKinsey has its own management journal; TheMcKinsey Quarterly.McKinsey has taken a strong lead in the area ofstrategic management consulting, leadershipand executive development.
  19. 19. Bain and CompanyAfter being plagued by lawsuits, layoffs and near-bankruptcy in the early 1990s,Bain has leaped back to the top of its game.Bain is ranked among the world’s most prestigious consultants, along withMcKinsey and the Boston Consulting Group — which once employed founderWilliam Bain.Bain is rare among major consulting firms for having a woman, Chairman of theBoard, Orit Gadiesh, at the top.The firm employs 1,500 consultants.
  20. 20. Bain and CompanySpecialties: Bain is a world leader in strategy consulting and has a stronginternational bent. Unlike some other strategy firms, Bain stresses that all itsstrategy recommendations must be immediately useful. Everything “comesdown to what the client will do differently Monday morning,” says Ms. Gadiesh.Good: Equal in prestige to its close competitors, Bain has a smaller, morecongenial feel than larger rivals and views encouraging a friendly environmentas a worthwhile expense.Bad: Bain employees must embrace conservative dress codes and travelextensively. Work hours are long as well — consultants can expect to spend atleast one day per weekend working or at the airport.
  21. 21. The Boston Consulting GroupThe Boston Consulting Group is also one of the ‘elite’ worldwideconsultancy groups, with a reputation for excellence, and successfulinnovation.It charges high-end fees for its services, but spends a lot of timediagnosing the organisation’s needs, before suggesting a changeinitiative.BCG solutions are often highly individualised, and make use of the latestinnovations in management thinking.
  22. 22. AccentureAccenture typically works in organisations using a team-based structure consistingof 8 -12 consultants (or a variation of this).Problems and issues are broken down into specialist areas, and individualconsultants are assigned specific tasks: accounting, org. structure, executiveleadership profiles, corporate culture, information technology.Detailed reports are generated from the investigations.Many consultants are learning on the job, and include some fresh graduates.The team leader is usually highly experienced.
  23. 23. Saville and HoldsworthSaville & Holdsworth typically works with organisations to conduct meaningfulresearch into their strengths and weaknesses.They use various forms of psychometric profiling and competency analysis, todiagnose current skills levels.Their corporate knowledge reservoirs consist of extensive profile-maps of highperformance managers, leaders and teams at various levels.These profiles are used as benchmarks, for comparative purposes.Change initiatives are sometimes suggested, but are generally driven by internalmanagers.
  24. 24. The Growth of the Management Consultancy IndustryDeregulation around the world means that many once-safe industries are facingnew competitors.Increased competitiveness has driven the pace of change within organisations,creating additional pressure on managers and employees.Increasingly, managers around the world are sensing that they are inadequatelyequipped to manage change.The Kennedy Research Group (1996) predicted an average growth rate of morethan 16% for the global management consultancy services market.The United Nations Conference on Trade & Development (1993) noted a similarlyrapid growth trend.These growth rates levelled off in 2001, and more modest global growth rates ofaround 6% (estimate) have occurred over the past 9 years.Much of the continued growth over this period has been fuelled by public sectordemand for consultancy services and advice.
  25. 25. 050100150200$US (billions)Figure One: Global Revenue Growth in the Management Consultancy IndustryUNCTD 25 30 36 43.2 51.84 62 73 84.75 98.39 114.24 132.63 152.98Kennedy 25 30 36 43.2 51.84 62 71.982 83.57 97.02 112.64 130.78 151.831991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
  26. 26. Dangerous Company - Major ContentionThe decision to hire management consultants can place atstake the careers of the very people who bring them in,the jobs of thousands of employees, millions ofshareholder dollars, and long-term relationships withcustomers. A corporation’s reputation can be put on theline.Authors: James O’Shea and Charles Madigan
  27. 27. Dangerous Company - Quotes: page 5The one characteristic in all of these engagements is weakmanagement. You don’t go out and spend all that money if youare in a position of strength.”To have a situation where there is chronic dependence onconsultants is an implicit admission of ineptitude inmanagement. This is absolutely very worrisome.The other thing is that because of this mutual dependence of theconsultant and the customer, it is often not to the consultant’sadvantage to come up with some delicate issues which shouldbe addressed.
  28. 28. A Blueprint for Successful Consultancy Intervention1. Acknowledge and agree upon the relationship between client &consultant:• Who is responsible for the diagnosis?• Who will drive the change?• What is the intended timeframe for the change process?• Are the external consultants merely facilitators or are they diagnosticspecialists?• Are the consultants drivers of the change process, and if so do theyhave authority over line managers?
  29. 29. A Blueprint for Successful Consultancy Intervention2. Agree upon the fee structure for the entire intervention up-front.• Determine the number of external consultants to be involved in theintervention.• Determine the level of expertise of each external consultant (you don’treally want to pay novices).• Determine the expected timeframe for the intervention.• Make fees contingent upon verifiable results, and agree upon theseresults at the outset.
  30. 30. A Blueprint for Successful Consultancy Intervention3. Determine precisely the scope of theintervention:• Is this merely a definitive diagnosis?• Is the diagnosis to be followed by consensual (two-party) analysis?• Has the protocol for feedback been clearlyestablished?• Are there clear guidelines for the transfer ofownership of expertise relating to the changeprocess?• Is there a definitive disengagement plan?
  31. 31. The Vault ReportsUp-to-date information on the management consultancy industry - career intelligencehttp://www.vault.comTop Six Professions listed on Analyst – consulting2. Accounting3. Management Consultant4. Analyst – Private Equity5. Investment Banking6. Management and Strategy Consulting
  32. 32. Concluding Comments• The management consultancy industry has continued to grow and diversify bothdomestically and internationally over the last 20 years.• More and more medium and large organisations have become reliant on externalexpert advice, as a result of the move toward leaner organisational configurations,heightened competition, and outsourcing.• The vast majority of management consultants are able to utilise their expertise to bringnoticeable improvements to modern organistions.• The success of any consultancy intervention depends upon the health and viability ofthe consultant-client relationship.• The responsibility for managing this relationship effectively, lies with the client.Thank You for Viewing These Slides